Right now, I’m searching the FTSE 100 for the best dividend stocks to buy. I’m not just looking for shares that will provide healthy shareholder payouts in the short term. I’m seeking companies that can provide a sustainable and growing dividend for years to come.
The following FTSE shares offer forward dividend yields above the 3.8% index average. But which should I buy today?
BP
Dividend yield: 4.3%. Oil giant BP (LSE:BP.) is tipped to provide a growing dividend over the next few years. It reflects economist expectations that oil prices will rise as supply issues linger.
The Brent benchmark has risen to one-year highs above $92 per barrel in recent sessions. Even though the global economy is spluttering, energy values are holding up from key producers like Saudi Arabia and Russia scaling back production.
But I’m not readying to buy BP shares for my portfolio. As someone who invests for the long term, I’m concerned by the company’s profits and dividend prospects as green energy steadily takes over.
To underline the point, International Energy Agency executive director Fatih Birol has said we are witnessing “the beginning of the end” for fossil fuels. The agency has predicted for the first time that oil, gas and coal demand will all peak before 2030 as cleaner sources rise in popularity.
BP has exposure to renewable energy sources like wind and alternative fuels including hydrogen. But this isn’t enough for my liking. And what’s more, the company has reduced planned investment in green power to 2030 and increased its oil and gas production targets.
GSK
Dividend yield: 4%. Pharmaceuticals giant GSK (LSE:GSK), on the other hand, can expect demand for its products to rise in the coming decades. Steady population growth and rising emerging market wealth could send medicines demand through the roof.
Holding shares in drugs developers can at times be a troubling experience. Failures at the lab bench and unfavourable regulatory rulings can cost companies a fortune in lost revenues and extra costs.
Encouragingly though, GSK has a great track record when it comes to getting its products out there. It’s why the company is one of the world’s top 10 biggest pharmaceuticals suppliers by sales.
In fact, the FTSE business is enjoying impressive momentum right now. In late July, it hiked its revenues and adjusted operating profit guidance for the full year. It now expects these to increase a healthy 8-10% and 11-13% respectively.
This is thanks in large part to strong sales in fast-growing segments like HIV. GSK is focused on developing treatments and vaccines in the fields of HIV, infectious diseases, respiratory/immunology and oncology.
It’s a strategy that could deliver outstanding long-term profits growth. And GSK is boosting investment in its drugs pipeline to give it the best chance for success too. R&D spending rose 9% at actual exchange rates to $5.5bn in 2022.
I think the company could deliver solid shareholder returns in the years to come. I’ll be looking to buy it when I next have spare cash to invest.
